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MND NewsWire features plain and simple interpretations of industry related data and events written in a manner that maintains the interest of random readers while still catering to the perspective of a housing market professional.

Word came late last week from both the Federal Reserve and the White House
that the federal government does not intend to stand by and watch the housing
and credit crisis drive the country into recession.

President George W. Bush announced a series of proposals intended to help homeowners
faced with mortgage defaults and Federal Reserve Chairman Ben
Bernanke told a group of bankers in Jackson Hole, Wyoming that, while the Feds
were not about to rescue Wall Street or shield investors from self-inflicted
loses, the committee will monitor the situation and act as needed to limit the
damages to the broader economy that may grow out of disruptions in the financial
markets.

There is wide speculation that the Fed will cut its rate for
overnight federal funds by at least a quarter point at its next meeting in mid-September
and Bernanke’s remarks were interpreted as further signaling such a move.

The President announced his program while insisting that the U.S. economy was
healthy and that subprime market problems were affecting only a small part of
the overall economy.

The President called on Congress to pass Federal Housing Administration (FHA)
Modernization Legislation which would permit lower down payments, allow
FHA to insure bigger loans, and give it more pricing flexibility. These reforms,
the President said, would allow FHA to help more families buy homes and offer
more options to homeowners looking to refinance existing mortgages.

The administration will also launch a new FHA Initiative Called "FHA-Secure"
designed to help people with good credit but who have not made all of their
payments on time because of rising mortgage payments. FHA would be able to offer
many of these homeowners an option to refinance existing mortgages so they can
make their payments and keep their homes. FHA will also charge mortgage insurance
premiums based on the individual risk of each loan, using traditional underwriting
standards, so it can expand access and help even more families.

Bush asked Congress to change a provision of the federal tax code that counts
cancelled mortgage debt on primary residences as taxable income. In the event
of a short
sale or a foreclosure, if the mortgage company recoups less than it is owed
and that amount is forgiven, present tax code treats it as taxable income. The
President proposes temporary relief to ensure that cancelled mortgage debt on
a primary residence is not counted as income.

The President said he had asked Housing and Urban Development Secretary Alphonso
Jackson and Treasury Secretary Henry Paulson to reach out to groups that offer
foreclosure counseling and refinancing - community organizations like NeighborWorks,
mortgage lenders and loan servicers, FHA, and Government-Sponsored Enterprises
like Fannie Mae and Freddie Mac - with the goal of expanding mortgage financing
options, identifying homeowners before they face hardships, and helping them
understand their financing options and find an appropriate mortgage product.

Bush also cited other programs that the federal government is initiating or
backing:

Pursuing wrongdoers and predatory lenders to ensure they are punished.
HUD, the Department of Justice, the Federal Trade Commission, and others, are
aggressively pursuing this program.

Encouraging financial literacy with the help of leading private sector
individuals.

Inclusion in the president's Budget of $120 million for NeighborWorks,
which provides foreclosure workshops and counseling to borrowers and $50 million
for HUD's housing counseling program.

The President's Working Group On Financial Markets, led by Treasury
Secretary Paulson and representatives of the Federal Reserve, Securities and
Exchange Commission, and the Commodity Futures Trading Commission is examining
some of the broader market issues underlying the recent mortgage problems including
the role of credit rating agencies and how their ratings are used in lending
procedures, and how securitization, the repackaging and selling of assets, has
changed the mortgage industry and related business practices.

Comments

"FHA will also charge mortgage insurance premiums based on the individual risk of each loan.... so it can expand access and help even more families."
It continually amazes me how little the government actually knows about the mortgage industry. That's why it is so terribly frightening whenever they try to 'fix' it. True FHA guidelines make FHA loans accessible to practically EVERY credit profile out there, but most lenders won't lend on those criteria. Maybe it should be mandatory!

Jill

on

Why were banks and mortgage companies allowed to offer people flexible rates? Some people can't forsee what would happen "if". These companies brought this on themselves all in the name of greed. Now the poor and unfortunate will pay the price. It sucks! I think the government should help the people. They help other countrys, who in turn want to destroy us. If someone wants to gain votes, they will figure out a way. Thanks for listening.

Anonymous

on

I find it amazing that somehow it's everyone else's fault but the person who actually signed the loan agreement with the variable rate terms or got an interest only loan because they couldn't really afford the house they wanted. Yet it's the banks fault for being greedy? Don't think so. Why should the government bail out people who knew what they were getting into in the first place. If they didn't understand the loan terms, they shouldn't have agreed to the loan.

jose

on

In response to anonymous of November 27, "Be realistic". You practically have to be an attorney to comprehend the language in both the loan and the real estate documents. What I do find amazing is that the professionals in the lending and real estate industry facilitated the loans being fully aware that the borrowers were unable to afford them. YSP and Listing commission was more important regardless of the ramifications of closing a sale.

Anonymous

on

In some cases, it is the most always the banks fault or the closing companies that don't explain all forms, they just say sign here and this is what it says. The paper work is so long and pressured by people to sign and make it sound good, my ARM will be applied 2 times a year until it hits max. now I am not able to make my payments. I did not purchase a house I could not afford, my home was only 65,000. and my payback is 210,000. now tell me who is crooked...

Pat

on

In response to Matt R. You're right Matt-I'm bankrupt so I don't qualify for the FHA bailout. My only option is short sale.
And I did know what I was getting into except people don't understand that when someone says your loan will adjust 3%that that does not mean 3% of the total owed. That's where the misunderstanding isI didn't know that in my case it meant $500 and $500 again 6 months later.

Anonymous

on

Not all licensed mortgage loan officers, and realtors, are at fault. Late Night quick rich, investors programs had done lots of damages, also.
People were buying those programs, and trying to buy and sell real estate the easy way and flipping it, like it was water. Inflating the market creating false values were none existed, and doing so much harm. 80% of those people did not use a real estate professional. So many people that did not know what they were doing, but they just wanted to become rich quick.

Greyhair

on

Some of these comments are so ignorant it's unbelievable. U.S. consumers are big babies whose lust for stuff and sense of entitlement are boundless. Here are some facts for the Jill's, Matt's, Pat's and Jose's below: Variable-rate mortgages with shorter maturities are the norm in most other industrialized, home-owning countries, the 30-year fixed rate mortgage largely a U.S. invention. Not hiring a lawyer if you can't understand the documents yourself is stupid - it's a big purchase and a big debt. The FHA has been making loans with insurance premiums for decades. Until subprime, they were the only game in town for weak credit borrowers. Why should every crummy borrower be approved? The end result is delinquency, default and foreclosure, inflated house prices from unsustainable demand. Get real folks. Greed on both ends of the loan process make us, the U.S., laughing stocks of the world.

Steve

on

Boy oh boy. Some of you people apparently have never been through rough times. We use to own our home in Michigan. Unfortunately, I refininanced in 1997 with a five year ARM to make my payments lower. In 2001, my company downgraded and laid off half of the employees because of the downturn after 911. I was one of them. I was unable to find another job in my profession in Michigan. I was approached to take a job in another state. I had to do what I had to do and rented our home out in Michigan to keep from loosing it. When realizing that the ARM was running out, I was being pro-active and contacting the bank to see if I could get a fixed loan before my payments went out of control. Because of my income now being lower than what it use to be, the bank said that I wouldn't meet the debt to income ratio and refused to help. Then over the course of several years, I was having to pay the difference between what I was able to get from my renter and what my mortgage payments were. In my case, because of the increase in payments over three years, I went from paying $300 a month to nearly $800 per month in addition to what I was getting from my renter. I did this hoping to ride out the storm. I put the home on the market to sell at NO profit. I just wanted to get out from it. It got to the point to where we couldn't afford it anymore when the offset went to $1000 additional. I talked with the bank again asking them to lower the payment in line with what the renter was paying until the economy came back. No, was the answer. I told them I couldn't afford it any longer because now my renter had moved out. They said we would have to miss two payments before the bank would consider an alternative. They got their wish. When money was no longer coming in, the bank suggested a short sale on our home that was already up for sale. They wanted me to sell it, in our case at $160,000. I knew we would be liable for the difference, so I droped the asking price from $229,000 (break even) to $179,900 to see where it would go. I had a $170,000 offer within two weeks. I thought we were going to get out of this with owing allot less. But when Chase sat on this offer for over two months before even deciding to accept it, the potential buyers walked. Shortly afterwards, Chase agreed to the $170,000 offer but the previous potential buyers made an offer on another home. The market had even gotten worse. We had a cash offer at $150,000. Same thing. Chase sat on it. Lost that one also. Then had an offer of $130,000. Chase sat on this one but promised they would work on accepting the deal. All along the house was in foreclosure process. When I finally gave up and turned off all of the utilities that I had been paying for along with upkeep to the outside while it was vacant, we found out that Chase had sold the property though another realtor for $114,000 even though we had an offer of $130,000 on the table. So when I hear about people complaining about getting relief, they really don't know what they're talking about or don't bother to look at all of the different situations that can happen. In my case, I DO blame the bank (Chase). I'm sure that when I find out the final outcome, that this will have go to court. Otherwise, we will be ruined for life if a bank (Chase) is able to step on people without giving it second thoughts. Any professional lawyer advise would be helpfull.

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